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ppt

1.
Financial Projections

2.
Financial Statements <ul><li>Numerical representations of what the business is physically doing. </li></ul><ul><li>In the case of a start-up business, the are projections of what the owners anticipate the business will do over the period of a year or two. </li></ul>

4.
Income Statement <ul><li>Shows how much money the organization has earned during the accounting period. </li></ul><ul><li>A pro forma income statement shows how much money the company expects to earn over the next year. </li></ul>

6.
Income Does Not Equal Profits <ul><li>Income (sales) is the amount of money that comes into the business </li></ul><ul><li>It is reduced by such things as accounts receivable and depreciation </li></ul><ul><li>A positive number here is no guarantee that you will have enough money to meet your monthly expenses. </li></ul>

7.
The Balance Sheet <ul><li>Lists everything the business owns and everything it owes at a given moment in time. </li></ul><ul><li>Divided into two columns: On one side is Assets and on the other is Liabilities </li></ul><ul><li>Assets= Liabilities + Equity </li></ul>

9.
Break Even Analysis <ul><li>Looks at costs to determine the volume of business necessary to break even in terms of profit and loss </li></ul><ul><li>Will also consider the amount of sales dollars needed to break even </li></ul>

10.
Break Even Calculation <ul><li>Determine the number of sales that will be made during the fiscal year </li></ul><ul><li>Estimate the average dollars per sale </li></ul><ul><li>Multiply the # of sales by the price per sale to arrive at a sales volume </li></ul>

12.
Variable Costs <ul><li>Costs that do change as the level of sales change </li></ul><ul><li>For example, in a restaurant: food, liquor </li></ul>

13.
Exceptions <ul><li>Some items don’t fit readily into one category. </li></ul><ul><li>For example. Full time management salaries will be fixed costs but part-timers may work only as needed, a variable cost. </li></ul><ul><li>Regardless, all costs must be separated into the fixed or variable category </li></ul>

14.
Interest Expense <ul><li>Determine the amount of money borrowed and the interest rate </li></ul><ul><li>Multiply the amount of the loan by the interest rate to get the amount of interest paid during the first year in business. </li></ul>

15.
Depreciation <ul><li>The full purchase price of capital equipment cannot be deducted from taxes in the year the purchase was made. The value must be “depreciated” over a number of years until the “capital asset” is deemed to be of no value. </li></ul>

17.
Don’t write in the Gray Space <ul><li>Gray spaces contain formulas </li></ul><ul><li>Simply fill in the data in the white spaces and the calculations will be made automatically. </li></ul>

18.
Financing the Business <ul><li>Equity funding </li></ul><ul><li>Money invested by owners </li></ul><ul><li>Debt funding </li></ul><ul><ul><li>Money that is borrowed and must be repaid </li></ul></ul>

20.
Debt Funding <ul><li>Borrowed and must be repaid with interest </li></ul><ul><ul><li>Loans from banks </li></ul></ul><ul><ul><li>Loans from family and friends </li></ul></ul><ul><ul><li>Loans from government agencies </li></ul></ul><ul><ul><li>Credit cards </li></ul></ul><ul><ul><li>Loans from owners that must be repaid with interestDid you have to raise or lower your original price estimates based on the break-even analysis? Did you have to reduce expenses? Did you have to borrow more or less money? </li></ul></ul>